AMP’s head of investment strategy and chief economist Shane Oliver said yesterday that rates need to be lower.
Lower rates, in conjunction with a lower Australian dollar, should help the average consumer, said Mr Oliver.
“The outlook for all that and the need to re-balance the economy probably means the Australia dollar heading down to 80 cents,” Mr Oliver stated.
Much of the problem stems for the fact that China in particular is “not looking so flash” and this is particularly acute for Australian growth, which is heavily reliant on Chinese demands for minerals.
On the upside, AMP’s chief analyst sees signs such as an improved Purchasing Managers' Index (PMI) figures that show other parts of the world economy improving.
“It is pretty much a thing we are seeing at the moment, that with the emerging countries some of the shine is coming off, and with the advanced countries it is getting a bit better after a terrible period,” he stated.
Mr Oliver does point out that the RBA cutting rates is going to create a problem for savers, as “bank term deposits are not going to return as they used to”.
However, Mr Oliver believes the rate cut will help more people than it will hurt.
“Australians have far more owed to banks than they have in bank deposits and therefore interest rates will help more Australians,” Mr Oliver explains.
